Sept. 9 (Bloomberg) — Rakuten Inc. agreed to buy U.S. rebates web site Ebates Inc. in Japan’s largest e-commerce deal as the operator of the country’s biggest online mall seeks expansion outside its home market through acquisitions.
Rakuten will pay $1 billion in cash for all of Ebates, it said in a filing to the Tokyo Stock Exchange yesterday. San Francisco-based Ebates offers cash rebates to customers who buy products ranging from laptops to lipsticks from the web site’s retail partners.
Rakuten’s billionaire chairman Hiroshi Mikitani is betting the purchase will help the Tokyo-based company push its global e-commerce strategy. Rakuten has also been plowing cash into technologies such as mobile applications and online video as it seeks to add to its online marketplace business.
“This deal doesn’t just mean we’ve started a cash-back web site in the U.S., I think we can operate this model all over the world,” Mikitani told reporters at a briefing in Tokyo yesterday. The purchase will lift the proportion of Rakuten’s e- commerce transactions from outside Japan to 16% from about 6% currently, he said.
Rakuten targets to raise the proportion to 50% of total around 2020, said Mikitani, Japan’s fourth-richest man with a net worth of about $7 billion according to the Bloomberg Billionaires Index.
Rakuten fell 1.3% to 1,254 yen in Tokyo yesterday, the lowest level since May 23. The stock has lost 20% this year, compared with the 0.2% decline in the benchmark Topix index. The shares dropped the most in three months on Sept. 8 on concerns about the deal’s cost effectiveness, after Rakuten confirmed it was in negotiations.
The company wants to create with Ebates a membership-based marketplace with “the world’s largest product line-up” ranging from niche to luxury items, and featuring a points program, Rakuten said in the exchange statement. The potential impact on its earnings from the acquisition is “difficult to estimate” at present, it said.
Ebates, which has 2.5 million active members and more than 2,600 retailers in its network, posted an operating income of $13.7 million on net revenue of $167.4 million in fiscal 2013, Rakuten said. Members spent $2.2 billion shopping through Ebates last year.
“Joining forces with Rakuten will help accelerate our U.S. and international growth,” Kevin Johnson, chief executive officer of Ebates, said in a Rakuten statement distributed by Businesswire.
The deal comes after Rakuten announced 18 acquisitions since the start of last year, and the cybermall operator said in June it’s open to more large-scale buys following its bond debut. Rakutenbought messaging service Viber Media Inc. for $905 million in March, Japan’s biggest e-commerce deal at the time according to data compiled by Bloomberg.
The company, which Mikitani founded in 1997, was an acquirer in three of the top ten e-commerce deals in Japan before the Ebates purchase was announced, according to data compiled by Bloomberg. As of June 30, Rakuten had about 1.7 trillion yen ($16 billion) in cash and short-term investments, according to data compiled by Bloomberg.